1. Market Outlook
India Research
April 22, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The benchmark indices surged to fresh intraday highs in morning trade on BSE Sensex 0.1% 11.9 17,473
positive global cues, with good earnings reports boosting sentiment. Later, the Nifty 0.3% 14.8 5,245
market moved in a range in mid-morning trade. However, in afternoon trade MID CAP 1.0% 67.8 7,115
the market slipped into the red to hit a fresh intraday low. Thereafter, the
SMALL CAP 1.4% 124.1 9,147
market moved between the positive and negative terrain in mid-afternoon
BSE HC 0.4% 22.4 5,341
trade. The Sensex closed flat, while the Nifty closed higher by 0.3%. The BSE
BSE PSU 0.4% 35.6 8,963
Mid-cap and Small-cap indices were up by 1.0% and 1.4%, respectively.
BANKEX 1.3% 133.4 10,813
Among the front-liners, Tata Motors, HUL, ICICI Bank, Jaiprakash Associates
and Reliance Infra were up by 2-3%, while Sun Pharma, BHEL, L&T, RIL and AUTO 1.1% 83.4 7,679
Hindalco were down by 1-3%. In the Mid-cap segment, Honeywell Automation, METAL -0.0% (7.9) 17,900
Manappuram Gen., Coromandel Intl., Infotech and Gujarat Fluorochem were OIL & GAS -0.4% (41.0) 9,905
up by 7-9%, while Kirloskar Brothers, CRISIL, Blue Dart, Sunteck Realty and BSE IT 0.2% 10.4 5,378
HMT were down by 3-8%.
Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones 0.1% 7.9 11,125
The trend deciding level for the day is 17495 / 5247 levels. If NIFTY trades NASDAQ 0.2% 4.3 2,505
above this level during the first half-an-hour of trade then we may witness a FTSE -1.0% (60.3) 5,723
further rally up to 17543 – 17614 / 5264 – 5283 levels. However, if NIFTY Nikkei 1.7% 189.4 11,090
trades below 17495 / 5247 levels for the first half-an-hour of trade then it may
Hang Seng -0.5% (112.5) 21,511
correct up to 17424 – 17376 / 5228 – 5211 levels.
Straits Times -0.5% (13.7) 2,968
Shanghai Com 1.8% 53.8 3,033
Indices S2 S1 R1 R2
SENSEX 17,376 17,424 17,543 17,614 Indian ADRs Chg (%) (Pts) (Close)
NIFTY 5,211 5,228 5,264 5,283 Infosys -1.1% (0.7) $61.6
Wipro -0.0% (0.0) $23.5
News Analysis
Satyam 0.4% 0.0 $5.4
Results Reviews: Hindustan Zinc, HCL Tech, Zee News, TVS Motors, ICICI Bank -0.3% (0.1) $42.6
Results Previews: Nestle India, ACC, Ambuja Cement, Gujarat Gas, Rallis HDFC Bank 0.3% 0.5 $147.8
Refer detailed news analysis on the following page.
Advances / Declines BSE NSE
Net Inflows (Apr 20, 2010)
Advances 1,935 928
Rs cr Purch Sales Net MTD YTD
Declines 963 390
FII 2,418 2,385 33 4,984 24,795
Unchanged 100 34
MFs 829 727 102 (1,844) (7,662)
FII Derivatives (Apr 21, 2010) Volumes (Rs cr)
Open
Rs cr Purch Sales Net BSE 4,670
Interest
NSE 13,800
Index Futures 1,066 1,441 (375) 14,620
Stock Futures 3,628 3,093 535 31,363
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
HCL Tech. 374 8.3 Sun Pharma 1,748 -2.9
Godrej Indus. 169 5.8 BHEL 2,463 -1.4
Yes Bank 271 5.5 L&T 1,574 -1.0
Indusind Bank 194 5.3 Reliance 1,054 -0.9
Container Corp 1,464 4.9 Hindalco 180 -0.9
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
4QFY2010 Result Reviews
Hindustan Zinc
Hindustan Zinc (HZL) 4QFY2010 net revenue grew by 97.4% yoy to Rs2,545cr as against
our estimate of Rs2,334cr. The outperformance was mainly led by substantially higher by-
product sales of silver metal and sulphuric acid. Silver sales volume increased by 26.6%
yoy to 42,399 kg. Zinc and lead concentrate sales during the quarter were at 49,073
tonnes. Although zinc volumes were down marginally by 1.0% yoy to 151,294 tonnes, lead
volumes increased 17.9% yoy to 18,450 tonnes. Zinc and Lead realisations increased by
105.9% yoy and 85.3% yoy to US $2,462/tonne and US $2,473/tonne, respectively.
Consequently, operating margins increased by 1,574bp to 60.8%. Although, interest
expenses increased substantially by 470% yoy to Rs27.7cr and other income fell by 30.8%
yoy to Rs134.5cr, Net profit increased by 124.7% yoy to Rs1,239cr, in line with our
estimate of Rs1,235cr. With the scale-up of zinc-lead smelting capacity, a significant
increase in silver production along with 100% backward linkages, we believe that HZL
holds the potential for positive earnings surprises, going ahead. We recommend an
Accumulate on the stock.
HCL Tech (3QFY2010)
HCL Tech recorded 7.5% yoy and 1.4% qoq top-line growth in 3QFY2010 (June FY) to
Rs3,076cr, backed by a strong growth of 11% qoq (57.5% yoy) in Infrastructure Services.
However, EBITDA margins were down by 131bp qoq (down 158bp yoy), mainly on
account of 190bp qoq (330bp yoy) increase in costs of revenues during the quarter.
However, despite lower margins and a 45% qoq reduction in Other income, the company
witnessed a 15.9% qoq (57.8% yoy) spurt in the bottom-line to Rs344cr, mainly on account
of a 19% qoq (22% yoy) reduction in Depreciation costs. We maintain an Accumulate on
the stock.
ZEE News
Zee News (ZNL, Ex-Regional GECs) reported a Top-line of Rs60.1cr, PAT of Rs2.1cr and
Operating Margin of 6.5%. ZNL registered Rs41.7cr Advertising revenue and Rs17.1cr
Subscription revenue from the residual business. The existing news operations, comprising
of Zee News, Zee Business, Zee 24 Taas and 24 Ghanta, recorded a 30% yoy growth in
advertising revenue for the quarter. The residual business has lower profitability, partially
due to losses in Zee Tamizh (Tamil GEC) and losses from two newly launched news
channels – Zee News UP and Zee 24 Ghantalu (Telugu News). The numbers are strictly not
comparable yoy owing to the demerger of Regional GECs to Zee Entertainment (ZEEL)
during the quarter. After the de-merger of Regional GECs, the ZNL management has not
disclosed comparable financials details of the residual business. However, the
management has indicated that it is not planning any new launches/initiatives for the next
two quarters, and would focus purely on consolidating its current news operations. We
estimate ZNL’s residual business revenue for FY2010E at Rs230cr. Based on a modest
CAGR of 15% in the Top-line during FY2010-12E, we expect ZNL to post Rs305cr revenue
in FY2012E. Based on ~1.7x (Base case) to 2x (Bull case) EV/Sales Multiple (comparing it
to TV Today) and adjusted for Rs80cr Net debt, we have arrived at a fair value range of
~Rs18-22.We recommend a Neutral view on the stock, due to a lack of clarity on its
financials, limited growth triggers and fully-priced in valuations (based on the EV/Sales
multiple). Upside risks to our estimates include: 1) Any positive surprises in the annual
report after complete financial disclosure, 2) Significant up-tick in Operating Margins, and
3) New channel launches or entry into new genres (less likely in near-term).
April 22, 2010 2

3. Market Outlook | India Research
TVS Motor (TVSM)
For 4QFY2010, TVSM reported a Turnover of Rs1,192cr (Rs892cr), a jump of 33.4% yoy,
which primarily came on the back of a 27.8% increase in Volumes and a 8.7% yoy jump
in Realisations. Operating Margins expanded by 122bp yoy during 4QFY2010, owing to
the 310bp contraction in Raw Material costs, which accounted for 68% (73%) of Net
Sales. TVSM recorded Net Profit of Rs20.3cr (Rs14.6cr), up 38.9% yoy. We maintain an
Accumulate rating on the stock.
4QFY2010 Result Previews
Nestle India (1QCY2010)
Nestle India is expected to announce its 1QCY2010 results. For the quarter, we expect
Nestle to report a 20.2% yoy growth in its Top-line to Rs1,522cr, driven by new product
launches in its processed food portfolio segment, beverages segment and coated wafer
segment. The company’s flagship brands Maggi and Nescafé are expected to grow at a
steady pace; however, the company is likely to witness margin pressure (decline by
~200bp), due to higher ad spends. Nestle’s Earnings for the quarter are expected to
grow by 18.6% yoy to Rs234cr, driven largely by Top-line growth. We maintain an
Accumulate on the stock, with a Target Price of Rs2,925
ACC (1QCY2010)
During 1QCY2010, we expect ACC’s net sales to decline by 2.2% yoy to Rs2,009cr,
primarily on account of lower sales volumes. The company’s Operating Margin (OPM) is
expected to decline by 542bp to 26.1%, on account of higher raw material and freight
costs. The Net Profit is expected to decline by 13.6% to Rs349.5cr, primarily on account of
poor operating performance. We maintain our Neutral View on the stock.
Ambuja Cement (1QCY2010)
Ambuja Cement’s (Ambuja) 1QCY2010 Net sales are expected to be up by 8.6% yoy to
Rs2,007cr, on account of higher sale volumes and better realisation. However, the OPMs
are expected to be down by 351bp to 24.9% on account of increase in freight costs. The
company’s Net Profit is expected to decline by 8.1% to Rs307.1cr, due to higher
depreciation and interest cost. We maintain our Neutral View on the stock.
Gujarat Gas (1QCY2010)
Gujarat Gas is going to announce its 1QCY2010 results today. We expect the company
to report top-line growth of 29.4% yoy to Rs397cr (Rs306cr) and bottom-line growth of
38.3% yoy to Rs50cr (Rs36cr). Volumes will continue to be supported by LNG on account
of subdued LNG prices. We expect the company to report Volume of 3.05mmscmd for
the quarter, registering a growth of 20.9% yoy and 2.4% qoq. Gross Spread is expected
to be marginally higher sequentially at Rs4.1/scm (Rs4.0/scm) on 1.6% appreciation in
the Rupee and full impact of the CNG price hike affected in the last fortnight of the
previous quarter. We maintain an Accumulate on Gujarat Gas, with a Target Price of
Rs306.
April 22, 2010 3

4. Market Outlook | India Research
Rallis India
Rallis India (RAIL) is scheduled to announce its 4QFY2010 results today. We expect the
Top-line to witness a growth of 7% yoy to Rs191cr, on the back of rising agro-commodity
prices fuelling demand for agri-inputs from farmers. The operating margin is expected to
expand by 646bp to 16%, aided by the lower commodity prices and continuing benefit of
restructuring. Consequently, the Net Profit is expected to grow 17% yoy to Rs20.4cr. We
currently have a Buy recommendation on the stock, and will review it after the result and
management meet.
Economic and Political News
3G spectrum bids up 90% to Rs6,634cr on tenth day
RBI says prior nod must for private bank QIPs
IMF pegs India growth at 8.75% in 2010
Govt. grants Navratna status to OIL
Corporate News
IOC to market bio-lubricant next year
Glenmark gets a boost in cholesterol drug battle with Merck
AI, Kingfisher, Jet resume Europe operations
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
ACC Results
Ambuja Cements Results
FAG Bearings Results
Nestle India Results
Gujarat Gas Results
Rallis India Results
April 22, 2010 4

5. Market Outlook | India Research
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